Presentation on theme: "Eschelon Energy Partners IPAA Private Capital Conference 2007 The Houstonian Hotel Houston, Texas January 18, 2007."— Presentation transcript:
Eschelon Energy Partners IPAA Private Capital Conference 2007 The Houstonian Hotel Houston, Texas January 18, 2007
Eschelon Energy Partners 2January 18, 2007 Disclosure The enclosed materials shall constitute neither an offer to sell nor a solicitation of an offer to buy limited partnership interests in Eschelon Energy Partners, LP or affiliated entities. Offerings of limited partnership interests in Eschelon Energy Partners, LP or its affiliates are only made by delivery of the appropriate confidential offering memorandum and subscription materials. Nothing herein shall be construed as offering literature or a prospectus. These materials are for informational purposes only and statements made herein may be materially different from those within any confidential offering memorandum and subscription materials. Any prospective investor should rely solely on the confidential offering memorandum and subscription materials for information regarding that entity. No representation or warranties of any kind are intended or should be inferred with respect to the economic return or tax consequences from an investment in Eschelon Energy Partners, LP or its affiliates. Past performance is not necessarily indicative of future results.
Eschelon Energy Partners 3January 18, 2007 Executive Summary Eschelon Energy Partners Eschelon Energy Partners seeks to establish and grow a premier private equity source of capital for the energy industry –Opportunity to participate in the growth and volatility of the energy industry –15% to 25% target annualized rate of return, net of fees, for limited partners 1 –Current investments of $1-10m are funded on a deal-by-deal basis –Larger investments possible through Eschelon led syndicates Eschelon will invest at entry points along the entire value chain –Energy has historical low correlation of returns with equity and fixed income markets 2 –Private market situations have significant upside potential relative to sector’s public market returns 3 –Scope of fund provides multiple entry points along the value chain increasing the opportunity to take advantage of sub sector volatility –Information flow across energy value chain creates a significant competitive advantage for the fund and its portfolio companies Disciplined investment process critical to success –To focus fund resources, portfolio investments to be limited to US and Canadian-based companies –Focus on four key attributes of investment targets: »Strength of management »Viability of business plan Eschelon has extensive experience throughout the sector and an excellent investment record –Direct investing through 1999 Reliant Energy fund produced top quartile returns of 12.7% IRR 1 –Experience includes principal, financial, and operating responsibilities across the energy value chain –Successful exits of portfolio companies through IPO, acquisition, and sale of minority public position –Strong industry relationships, knowledge, and Houston base yields rich deal flow »Value of co-investors »Pricing and terms of security 1 Past performance is not indicative of future returns, which will vary. 2 JPMorganChase 3 Thompson Venture Economics
Eschelon Energy Partners 4January 18, 2007 General Partner Tom Glanville, Managing Partner: Tom Glanville is the Managing Partner of both Eschelon Energy Partners and Eschelon Advisors, an affiliated consulting company. He has 26 years of energy sector experience and leadership positions in both operations and finance. Tom has held leadership positions at Reliant, Enron Corp. and Bankers Trust Company. Tom joined Reliant as Vice President, Corporate Development in 1998 and lead the corporate wide review and analysis of a $20 billion merger of equals with a U.K. power generator. As founder of REVI and its President from 1999 through 2002, Tom had primary responsibility for over $100 million in direct and indirect private equity commitments and was also a member of the REVI investment committee, which included the heads of each of Reliant's business units and approved each REVI transaction. In conjunction with these responsibilities, Tom served as Reliant's Vice President, Technology and New Ventures from 1998 through 2002 and as Acting President, Reliant Energy Communications from 2001 through 2002, where he lead the management, restructuring and sale of that entity. Tom's tenure at Enron from 1991 to 1998 included service as President of Enron Capital & Trade Resources Canada Corp., the company's integrated Canadian energy merchant. While based in Calgary from 1994 to 1996, he lead the company's significant expansion of its physical energy commodity marketing and energy commodity risk management activities and initiated its energy producer finance business. Tom's other positions at Enron included Vice President, Enron Capital & Trade Resources Corp. from 1996 to 1998, Vice President, Enron Finance Corp. from 1992 to 1994 and Vice President, Enron Oil Trading and Transportation Company from 1991 to 1992.
Eschelon Energy Partners 5January 18, 2007 General Partner Tom Glanville (continued): At Bankers Trust Company, Tom provided merger and acquisition advisory services to a wide variety of companies in the domestic and international natural resource sector from 1987 to 1991, serving as a vice president in 1990 and 1991. He led the 1990 Japan Petroleum Exploration Company / Osaka Gas Corp. purchase of Universe Tankship, Inc.'s equity stake in the Indonesian Joint Venture, the first commercial liquefied natural gas ("LNG") project in Asia. He also served as a banking officer in the energy group at Texas Commerce Bank, Inc. from 1985 to 1987, and held operating and finance assignments at Mesa Petroleum Co. from 1980 to 1983. Tom has served as director of Itron since 2001 and is a current member of its audit committee with the qualification as a "financial expert". He is also a director of Eschelon portfolio company Chroma Exploration and Production, Inc. Through Eschelon Advisors, LP ("Eschelon Advisors"), his wholly-owned consulting company established in 2003, Tom has served as a consultant to Reliant on its private equity portfolio, in addition to acting in an advisory role for several private companies in the energy sector. Tom graduated with honors from the University of Virginia in 1980 with a Bachelor of Science in Economics. He received his Master of Science in Mineral Economics from the Colorado School of Mines in 1984, summa cum laude. His masters thesis was titled "The Relative Economics of Domestic Oil and Gas Exploration and Development 1978-1983" and was presented to the Society of Petroleum Engineers in March 1985. Serving as a leader and board member of several Houston not-for-profit entities, Tom is the Chairman of the Society of Performing Arts, a Trustee and member of the Executive Committee of the Museum of Fine Arts, Houston, an Associate Member of the Board of Visitors of the University of Texas M. D. Anderson Cancer Center, and has served as a board member of the Houston Museum of Natural Science. Tom and his wife Liz reside in Houston with their three children - Ali, Mackenzie and Pierce.
Eschelon Energy Partners 6January 18, 2007 General Partner Rob Glanville, Investment Committee Member: Investment Committee member Rob Glanville has over 16 years of private equity, chief financial officer and financial institution experience. Rob is a founding partner of a New York-based private equity firm, Pine Brook Capital Partners, which is led by Howard Newman, former Vice Chairman of Warburg Pincus. Pine Brook Capital Partners is a growth equity provider for established management teams in the energy and financial services sectors. From 2003 through mid-2006, Rob served as Senior Vice President, Finance and Treasury Services for Arch Capital Group (NASDAQ: ACGL, referred to herein as “Arch”), a Bermuda-domiciled (re) insurance company with $3.0 billion in capital, where he was responsible for investment management/treasury functions, capital allocation and business development, internal audit and operational and financial reporting. Rob was the principal architect and negotiator of Arch’s $1b Flatiron side car vehicle formed after the hurricanes of 2005 to allow Arch to participate in ensuing hard property market while managing its capital at risk. Rob joined Arch in September 2003 after serving on its Board of Directors from November 2001 as a representative of Warburg Pincus. Rob was a principal negotiator and the lead transaction execution professional for Warburg Pincus in connection with its $445 million investment in Arch, which was, at the time, Warburg Pincus’s largest investment in a single portfolio company. Rob joined Warburg Pincus in January 1999 and was promoted to Vice President in December 1999. From April 1997 through December 1998, Rob served as the Chief Financial Officer for the APP Group, a Czech Republic- based IT systems integrator partially funded by Warburg Pincus. In 1993, Rob founded F. A. Services LLC, a boutique financial advisory firm that raised capital for businesses in Central and Eastern Europe. Rob served as managing partner of the company from 1993 through 1997 and also served as the chief financial officer for several clients. Rob began his career as an analyst at Morgan Stanley & Co. from 1988 through 1992, including two years in Tokyo. He earned an A.B. in American History in 1988 from Princeton University (summa cum laude, Phi Beta Kappa). Rob and his wife Laura reside in Greenwich, Connecticut with their three children – Ryan, Taylor and Rowan.
Eschelon Energy Partners 7January 18, 2007 Investment Record At Reliant Energy Ventures, energy sector investments for which the Eschelon team was responsible had an average pre-tax IRR of 260% in the 1999-2003 time frame, including: –Itron (NASDAQ “ITRI”): managed and sold 10% position in this utility metering, equipment manufacturing, and services company for a $22m gain (803% IRR, 4.94x return) 1 –Hydrogenics (NASDAQ “HYGS”): fuel cell test station and services company which went public and earned a 5.20x return in 18 months (233% IRR) 1 –Northern Power Systems: a distributed energy systems integrator sold to Distributed Energy Systems (NASDAQ: “DESC”) for an 7% IRR (1.21x return) 1 As part of Reliant Energy Ventures responsibilities the Eschelon team managed $60M of commitments to venture funds. –Managed positions in Kinetic Ventures I, Micro-Generation Technology Fund (MGTF), and UTECH Climate Challenge Fund (UCCF), increased commitment to MGTF and initiated commitment to Kinetic Ventures II in 1999 –Led LP group in negotiations with GP of MGTF and UCCF to immediately distribute publicly traded securities held by the GP –Evaluated and immediately sold distributions in energy technology companies and telecommunications companies in 2000 and 2001 due to concerns about excessive valuation –Managed process of selling entire portfolio in secondary market, with closing in 2Q03 Tom Glanville has a successful equity investment record in public Canadian oil and gas producers –C$7M investment in Beau Canada (1996) sold to Murphy Oil in 2000 for 7.2% IRR, 1.3x return 1 –Saxon warrants obtained in prepaid contract sold in 1997 (company eventually sold to Forest Oil) 1 Past performance is not indicative of future returns, which will vary.
Eschelon Energy Partners 8January 18, 2007 Investment Philosophy Key to success is a disciplined investment process formed by principal, financial, and operating experience in the sector and tested successfully during difficult markets Analysis of critical attributes – all must be present for an investment –Strong management – record of ability to navigate through tough industry conditions, shareholder value focused, high energy, sector expertise –Viable business plan – stress tested on key variables for a wide variety of outcomes, reasonable growth projections, necessary capitalization –Value-added co-investors – sector expertise, long-term ability to fund company, active investors, like-minded –Appropriate valuation – given risk, ability to build significant value for investors, governance and control, terms and conditions Investment Committee formally reviews each proposed transaction –Consists of General Partner team Execution and Operation –After formal review, final due diligence includes principal background checks and in-depth analysis of operations and financials –Third party resources mobilized where necessary to assist in investment, due diligence, and monitoring processes –Team actively participates with portfolio companies on a regular basis through board meetings, detailed reporting systems, and active involvement in company strategy and direction Prompt distribution of cash and prompt sale / distribution of public securities post lock-up –Eschelon helps portfolio companies find liquidity and additional capital in many different ways –Public company positions held when Eschelon has significant influence and sees significant potential returns
Eschelon Energy Partners 9January 18, 2007 Target Investment Structure Size:$1-10m in total investment per portfolio company Form:convertible preferred stock, convertible debt (for protection versus rest of equity capitalization in certain situations), or common stock Governance:board seat(s) with control / supermajority rights / negative control by investment syndicate Ownership:5-60% (investor group would control or have veto / blocking rights over major issues) Stage:mid to late stage (no research or seed stage projects), though would fund start-up teams focusing on securing energy assets and businesses. Would also invest in public companies through both public and non-public securities. Co-investors:appropriate mix of private equity funds and strategic investors Holding Time Period:up to 5 years Domicile:US or Canada Management Equity Participation:meaningful to their net worth and including capital invested alongside investor group Initial Enterprise Value:$50 – 200m given normal levels of leverage available in various industry sub sectors
Eschelon Energy Partners 10January 18, 2007 Current Portfolio Itron Inc. (NASDAQ:ITRI) Spokane, Washington Description: leading worldwide supplier of metering, data collection and monitoring hardware and software solutions for energy and water providers. Investment Dates: 2003-2006 Amount: $3m Board Seats: One Saber Resources, LLC Midland, Texas Description: Permian Basin focused oil and gas acquisition, exploitation, and production company. Investment Dates: 2004, 2005 Amount: $1m Status: Lehman bought 43% of Saber in November, 2006 in return for cash and oil and gas properties. As part of this transaction, Saber returned 50% of invested capital to shareholders at 1.93 times initial valuation. Co-Investors: Wagner & Brown, Gulfstar, Steve Webster
Eschelon Energy Partners 11January 18, 2007 Current Portfolio Chroma Exploration and Production, Inc. Houston, Texas Description: Gulf Coast onshore and shelf oil and gas exploration and production company. Investment Date: 2005 Amount: $3m Board Seats: One Co-Investors: Wellington, D. E. Shaw, NGP Capital Partners Milagro Exploration, LLC Houston, Texas Description: Oil and gas exploration and production company focused on the onshore Gulf Coast region of Louisiana and Texas. Investment Date: 2006 Amount: $1m Co-Investors: Plainfield
Eschelon Energy Partners 12January 18, 2007 Private Capital Investment in the North American Upstream Sector – 2007 versus 2006 Factors / Correlations Amount Global Liquidity Hydrocarbon Prices Service & Supply Costs Consolidation Tax Changes Management Carry More++---- Same++-+-- Less---+++
Eschelon Energy Partners 13January 18, 2007 Contact Data Eschelon Energy Partners 712 Main Street, Suite 2200 Houston, TX 77002-3290 713-546-2621 713-546-2620 (Fax) www.eschelonenergypartners.com Thomas S. Glanville Managing Partner firstname.lastname@example.org
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